Around 50% of us make New Year’s Resolutions and ‘sort the finances out’ must be one of
the most popular: but that’s a little vague – it’s more a wish than a firm commitment to
take action. Looking at the January appointments we’ve had with new and existing
clients, here are the topics that we’ve discussed most often. If you’re determined to
sort out your finances, these may give you some food for thought.
1. Sort out the mortgage
The mortgage is the biggest monthly expense for the vast majority of people, and
making sure that the rate you’re paying is competitive is basic common sense. Many
people are paying a higher rate than they need to and half an hour with an IFA like ourselves or
independent mortgage broker can be time very well spent. Yes, there are costs involved
in moving your mortgage, but these can often be outweighed by the savings to be made.
2. Sort out our life cover
This is an absolute priority, especially if you have children. Many people don’t know the
answer to questions like ‘how much life cover do I need?’ ‘How much do I have?’ ‘Does it
include critical illness cover?’ No-one likes to think about the possibility of being
seriously ill or dying, and therefore we tend to neglect our protection policies. Life
cover can be surprisingly inexpensive: and even if you do have cover in place, make sure
you have it checked on a regular basis. In many cases the cost of protection is continuing
to fall and it may be possible to replace old policies and increase the amount of
protection you have, without increasing your premiums.
3. Start saving for the children
However much you’ve just spent on Christmas presents, your children are going to cost
you a lot more in the future. Whether it’s university tuition fees, a first car, your
daughter’s wedding or the deposit on a house, the numbers are only going to go one way.
Even if you only save a small amount, doing it on a regular basis over a long period can
make a significant difference – and with the ability to save tax efficiently through an
ISA, at least the taxman will be on your side.
4. Start saving for ourselves
What’s true for the children is equally true for yourself; if there’s a specific savings
target you have in mind, or whether you simply need to save for the proverbial ‘rainy
day,’ the earlier you start to save the easier it is to achieve your goal.
5. Sort out my pensions from previous employment
Many people have pensions left over from previous jobs, and despite various Government
initiatives aimed at simplifying the system they still don’t have an accurate idea of how
much is in their pension ‘pot.’ Good pension planning is impossible without knowing the
position you’re starting from, so it’s a sensible idea to talk to us and find out the
position with any old pension policies. For example, can they can be brought together
and simplified?
6. It’s time I understood the company pension scheme
Just as importantly, far too many people don’t understand their existing company
pension scheme. Is it final salary? Money purchase? Eightieths? Sixtieths? Can I make
additional contributions? Buy extra years? Again, half an hour with a knowledgeable
independent financial adviser like ourselves will be time well spent. We’ll be able to summarise the
main benefits of the scheme for you, tell you the sort of pension you’re likely to receive
and advise you of the best course of action if you want to improve your pension
benefits.
7. Investigate Inheritance Tax and Long Term Care
If it’s the case that your parents are elderly, then it may be worth thinking about Long
Term Care planning. Similarly if their – or your – estate is likely to be subject to
Inheritance Tax, then action taken now could pay significant dividends in the future.
Again, we will be able to tell you what’s possible, and the steps that could be taken
now to prevent an unpleasant surprise in the future.
8. Look at Private Medical insurance
With tales of woe from the NHS continuing – and more economies seemingly still to be
made – many people are starting to look at the option of private medical insurance. This
may be an investment worth making, particularly if you run your own business and would
need treatment at a time to suit you.
9. We need to sort out the partnership insurance
Many businesses are run as a partnership (whether it’s a straightforward partnership or
through equal shares in a limited company). The death or serious illness of one of the
partners could have catastrophic consequences for the business – and serious
implications for the other partner. And yet very few businesses have addressed the
simple question of partnership assurance. We will be able to explain the basic rules
to you and give you an idea of what protection might cost: you may well be pleasantly
surprised!
10. We need to make a will
Last – but by no means least – make sure that you have an up to date will. The
consequences of dying ‘intestate’ (that is, without a will) can be severe, and with a
simple will being relatively inexpensive it’s sensible to make sure that this area of your
financial planning is kept up to date.
